Entrepreneurial Growth Through Privatization: The Upside of Management Buyouts

Abstract

The authors examine the upside potential of privatization of both publicly traded firms and state-owned enterprises through the lens of agency and entrepreneurial cognition theory. In addition to managerial incentives, they argue that significant entrepreneurial progress is made through a cognitive shift from a managerial to an entrepreneurial mindset. The two perspectives provide a framework for understanding buyouts and how managerial incentives and individual cognition, considered in tandem, effectively expand managerial discretion and thereby stimulate upside growth.